Debt markets fill budget gap

  • 2009-09-17
  • From wire reports
VILNIUS - Lithuania raised 561.5 million litas (162.6 million euros) through Treasury bill auctions and private placements in August to finance its budget gap, reports Bloomberg.
The Finance Ministry said the government received 330 million litas from T-bill auctions, at an average interest rate of 8.07 percent, while private placements totaled 231.5 million litas at a yield of 6.45 percent.
The government is raising funds to finance the budget deficit as the economic recession depletes tax revenues. The government has reduced spending by about 7.5 percent of gross domestic product this year in an effort to shore up public finances.

These measures may not be enough to prevent the budget deficit widening to 8 percent of GDP this year, Prime Minister Andrius Kubilius said. The government raised a total of 8.19 billion litas through the first eight months of this year. Lithuania, like its Baltic neighbors Latvia and Estonia, pegs its currency to the euro inside the exchange rate mechanism, obliging it to comply with EU fiscal conditions.